A year after one of the worst disasters in the history of the nuclear industry, uranium stocks are once again feeling the power.

They have been rising strongly as governments around the world soften their hard-line stances against atomic energy and investors bet that the nuclear industry’s future has merely been delayed rather than demolished.

Slideshow

The meltdown at Japan’s Fukushima nuclear plant following an earthquake and tsunami on March 11, 2011, threatened to shutter the world’s reactors. Japan took most of its 55 atomic power plants offline in the immediate aftermath of the meltdown, while Germany pledged to close its 17 plants by 2022, and other countries undertook a review of their own programs.

But interest in nuclear power is slowly reviving as governments ponder its still attractive economics. China, which has 15 reactors and had halted approvals for new plants, is hinting that it intends to build more. On Thursday, the state-owned China Daily cited a Chinese official as saying that plans for “about 10” nuclear power plants, which had been suspended as part of the country’s review of nuclear safety, would soon get the nod to begin construction.

U.S. nuclear authorities last month gave the okay for two nuclear reactors to be built – the first in three decades. Britain and France have also just signed an agreement to build a new generation of atomic power plants in Britain.

The revival of interest in nuclear power has yet to budge spot uranium prices, which have been stuck around $52 (U.S.) a pound for months. But it has lit a fire under stock prices. The Global X Uranium exchange traded fund (ETF), which owns producers such as Cameco Corp. and Uranium One Inc. , has risen nearly 24 per cent this year, more than doubling the advance of the broad stock market.

“Any positive news in the marketplace helps the stocks,” says Dundee Securities analyst David Talbot. “I’m quite bullish. I think the spot price will average $65 [a pound]this year, and $75 next year.”

A recent spate of takeovers show that both major miners and end users are confident of uranium’s long-term appeal. Mining giant Rio Tinto PLC last year acquired Canadian uranium junior Hathor Exploration Ltd. And China Guangdong Nuclear Power Corp. a state-owned nuclear company, last month launched a $2.4-billion bid for Australian-based Extract Resources Ltd.

Analysts say that demand will run far ahead of supply when Russia’s 20-year deal to sell uranium recycled from nuclear warheads to the United States expires at the end of next year. That will take about 24-million pounds a year off the market.

About 170-million pounds of uranium was consumed last year, while only 140-million pounds was produced, said Versant Partners analyst Robert Chang. “Fundamentally speaking, we are already in a deficit.”

The shortfall will increase pressure to build new uranium mines, but miners cannot operate profitably at current long-term prices around $60 a pound, Mr. Chang said. “We need $70-a-pound uranium for new mines, particularly in Africa, and some executives say $80 to $85.”

New mines, including Cameco’s Cigar Lake project, will help cover the deficit, but may not be sufficient to meet growing demand, he said. “China is building a lot of nuclear power plants, [so is]India and so is Russia.”

Even Japan may re-open the door to nuclear power. Its reactors are undergoing stress tests to see whether they can withstand disasters like the one at Fukushima.

“Probably by April or May, we might see two [Japanese]reactors back,” Mr. Talbot said. “As Japan starts to come back to the table, and as more uranium projects get deferred … those [events]are going to move spot prices. Spot has to move first before term prices start moving northward.”

Jason Mayer, a portfolio manager who runs a uranium-focused mutual fund at Middlefield Capital Corp., said he is optimistic about the metal’s future, but he suggests investors remain cautious over the short term because commodity prices haven’t moved.

“In the early parts of a bull run, you want to have exposure to some of the larger companies like Uranium One, Cameco and Paladin Energy,” he said. “But some of these stocks have already had a decent move.”

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Mining mettle

The revival of interest in nuclear power has yet to budge spot uranium prices but has lit a fire under stock prices. Here are top picks from two industry observers.

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